First-Time Buyer Assistance Programs Kenya

The Kenyan Government's effort to create an enabling environment that enables low-income households to access a housing fund that enhances housing affordability was a good move for the country. Let's dive deeply into how it started, who initiated it, the logic behind it, and its success rate.

In this article, we will answer questions like whether it is ever going to work, what it has accomplished so far, the project's pitfalls, how to revive the program, and the way forward.

Affordable Housing: A Constitutional Right and National Priority

You do not need to save for years to afford your dream home; Kenya’s Affordable Housing Program could be your key. This is a constitutional right and national priority backed by the 2010 Constitution, article 43, Section 1B, which guarantees the right to adequate housing. The government’s mission in the Big Four Agenda aims to deliver 500,000 affordable homes.

This initiative isn't just about putting roofs over heads; it’s about national development. By boosting the housing sector, the government is turning real estate into an investment that grows the economy. Housing makes up about 7.3% of Kenya’s GDP, and this program aims to increase that. The affordable housing scheme also creates jobs, strengthens communities, and drives infrastructure development.

How It Started and Who Initiated It

The Housing Programme (AHP) is a core pillar of the Kenyan government's Big Four Agenda, introduced by President Uhuru Kenyatta in 2017. The Big Four Agenda aimed to drive national development through four key areas: Affordable Housing, Universal Healthcare, Manufacturing, and Food Security.

Housing was prioritized due to the growing demand for urban homes, the expanding population, and the need to address informal settlements. Article 43 of the 2010 Constitution guarantees all Kenyans the right to affordability and adequate housing, which laid the legal foundation for the AHP.

The AHP, alongside the Home Ownership Savings Plan (HOSP), which offers tax-sheltered savings plans for homebuyers, was designed to close the housing gap by delivering 250,000 houses annually, or 500,000 homes total by 2022.

The government aimed to make homeownership accessible to low- and middle-income Kenyans, who are often priced out of the market. However, by 2022, less than 10% of the intended units had been delivered, signaling that the program had fallen significantly short of its targets.

The Logic Behind the AHP

The logic behind the AHP is clear: Kenya’s housing deficit stood at around 2 million units, increasing by about 200,000 units annually. With private developers focusing on luxury homes, the need for affordable housing was urgent. The Housing Act Cap 117 establishes a Housing Fund under the National Housing Corporation's (NHC) control.

The National Housing Corporation (NHC) and government programs like the National Housing Development Fund (NHDF) sought to spur private sector involvement in affordable housing by providing financing options and incentives. The KMRC, licensed by the central bank, provides long-term funding to mortgage lenders, such as commercial banks, enabling them to offer affordable mortgage products to first-time homebuyers.

This collaboration has made KMRC mortgage interest payments competitive, improving access to affordable financing. The Home Ownership Savings Plan (HOSP) and NHDF serve as savings and financing mechanisms for first-time buyers, and more Kenyans are participating in the housing market.

Success Rate: Has It Worked?

Despite its ambitious goals, the AHP has not fully succeeded. By 2022, the program had delivered less than 10% of its intended housing units. Several factors have contributed to the shortfall, including bureaucratic delays, lack of funding, and regulatory bottlenecks(the policies slowing down the process). Land ownership issues and the lengthy approval processes for building projects have been major obstacles.

While the Kenya Mortgage Refinance Company (KMRC) has provided a boost by partnering with financial institution to offer more affordable financing, high mortgage interest rates and limited access to credit for lower-income households remain significant barriers. The AHP's reliance on public-private partnerships (PPPs) also hasn’t been as effective as anticipated, with many developers still reluctant to invest in affordable housing due to perceived lower profitability.

Is It Ever Going to Work?

The AHP still has the potential to work, but the strategy needs significant restructuring. The program's foundation is strong, but progress has been slow due to inefficiencies in land allocation, bureaucracy, and financing challenges.

For the AHP to be successful, emphasis needs to be placed on streamlining the land allocation and approval processes to avoid delays in starting projects.

It needs expanding financing mechanisms for developers and homebuyers, including more favorable mortgage products like those offered by the KMRC.

The government needs to increase public awareness about affordable housing options, including the Boma Yangu initiative, which provides housing for first-time buyers.

Enhancing private sector involvement by offering better incentives and guarantees of returns for private developers could make progress toward the program.

What Has It Accomplished So Far?

Although it has fallen short of its ambitious targets, the AHP has achieved some notable milestones. It has raised public awareness about the housing crisis and the need for affordable options. Though not at the expected scale, the government has delivered units in areas like Nairobi and Athi River.

Financial incentives such as stamp duty exemptions for first-time homebuyers and the 15% housing relief on employee contributions have been positive steps in making homeownership more attainable for some Kenyans.

The KMRC has played a critical role in providing long-term funding to banks, enabling them to offer competitive mortgage products. By partnering with financial institutions, the KMRC has helped increase access to housing finance, especially for first-time homebuyers.

The Pitfalls of the Project

Several pitfalls have limited the AHP's success. Many projects have been delayed due to land ownership disputes and the slow pace of zoning regulations and planning approvals. Despite the involvement of the KMRC and NHDF, many Kenyans still struggle to meet the criteria for affordable mortgage products. Mortgage rates remain high for low-income earners.

The private sector has been slow to engage in housing projects due to concerns about low returns on investment. While programs like the Tenant Purchase Scheme (TPS) offer alternatives, adoption has been slow. Navigating government processes remains difficult, from applying for homebuyer assistance programs to accessing financing options.

How to Revive the Program

Reviving the AHP will require targeted reforms. To avoid delays in project development, the government must speed up land allocation and planning approvals. Expanding partnerships with institutions like KMRC and providing lower-interest, longer-term mortgages for low-income households will make housing more accessible.

To boost private sector involvement, the government needs to increase tax incentives, offer land at reduced prices, and guarantee returns. The government can attract more private developers to housing projects.

Public awareness and education are key to reviving the program. Many Kenyans are unaware of existing programs like HOSP and Boma Yangu. A broader outreach campaign could help more people utilize the available schemes.

The Way Forward

Kenya’s Affordable Housing Project is a vital initiative that needs significant adjustments to meet its goals. The program can become more effective by streamlining processes, enhancing financing options through entities like the KMRC, and increasing private sector involvement.

The future of housing development in Kenya still holds promise, with the government committed to delivering housing and continuing partnerships with institutions. With the right reforms, the AHP can transform housing in Kenya, ensuring that more citizens can enjoy the constitutional right to adequate housing.

Frequently Asked Questions

Who is eligible for affordable housing in Kenya?

Kenyan citizens with a monthly income between KSh 15,000 and KSh 150,000 are eligible for affordable housing, with preference given to first-time homebuyers. Applicants must also be registered under the Boma Yangu initiative.

How much does affordable housing cost in Kenya?

Prices range from KSh 600,000 to KSh 3 million, depending on the size and location of the unit.

How much is Boma Yangu houses in Kenya?

Depending on the unit type, Boma Yangu houses range from KSh 1 million to KSh 3 million.

What is the affordable housing finance project in Kenya?

The Affordable Housing Finance Project in Kenya is supported by the (KMRC), which provides long-term, low-interest home loans to primary mortgage lenders to improve access to housing finance.